Fixed Price vs. Cost-Plus Construction: What Homeowners Really Need to Know

Building a custom home or taking on a major renovation is one of the biggest financial commitments you'll ever make. Whether you're constructing a new residence in West Vancouver, renovating a home in North Vancouver, upgrading a property in Lions Bay, or building a mountain retreat in Whistler — the contract you sign with your general contractor will shape the entire experience.

There are two primary contract types in residential construction: fixed price and cost-plus. The difference between them isn't just about numbers on a page. It determines who carries the financial risk, who pays for mistakes, and whether you'll know the final cost of your home before or after it's built.

Over the past 16 years, we've worked under both models across more than 100 projects. Our experience has been clear: when supported by thorough design and professional planning, fixed price contracts provide the highest level of certainty, accountability, and peace of mind for homeowners.

What Is a Fixed Price Contract?

A fixed price contract does exactly what the name suggests — it establishes a clearly defined total cost for your project before construction begins. That price is based on completed architectural drawings, interior design documentation, engineering coordination, and a fully defined project scope.

Under this arrangement, the contractor takes responsibility for delivering the project within the agreed budget. If something goes wrong during construction — a coordination error, a missed detail in the drawings, unexpected rework — those costs belong to the contractor, not to you.

This level of certainty matters enormously when project budgets reach hundreds of thousands or millions of dollars — which is common for custom homes in West Vancouver and the North Shore.

What Is a Cost-Plus Contract?

A cost-plus contract works very differently. Instead of agreeing on a total price, you pay for the actual cost of everything — labour, materials, subcontractors, equipment — plus a contractor management fee, typically a percentage of total costs.

On paper, this sounds transparent. In practice, it means you won't know the final cost of your home until the last invoice arrives. And here's the part that catches many homeowners off guard: under a cost-plus agreement, you pay for everything. That includes the contractor's own mistakes, rework from coordination failures, costs arising from incomplete drawings, and decisions that should have been resolved before construction started.

Too many homeowners describe their cost-plus experience with a phrase that has become almost a running joke in the industry: "It will cost as much as it will cost, and it will take as long as it will take." That's not a construction contract. That's an open chequebook.

Why So Many Custom Homes Go Over Budget

The single most common cause of budget overruns in residential construction isn't bad luck or material price spikes. It's incomplete design documentation.

Most architectural drawings — even good ones — don't contain enough detail to fully define every construction and interior element. They'll show floor plans, exterior elevations, and structural layouts. But they often leave out the details that actually drive cost: interior wall elevations, millwork specifications, lighting and electrical coordination, material selections, fixture integration, and finish details.

The Scandinavian Barn House on Spencer Road — complete design documentation enabled a fixed-price construction agreement for this 8,029 sq ft custom home.

When these details are missing, contractors fill the gaps with assumptions. And as decisions get made during construction — which tile, which countertop, which lighting layout, how that staircase actually connects to the ceiling — those assumptions change. Every change generates a cost adjustment. And under a cost-plus contract, every one of those adjustments lands on the homeowner's desk as an additional invoice.

This is the fundamental problem. It's not that contractors are dishonest. It's that nobody can accurately price what hasn't been defined.

The Solution: Complete the Design Before You Build

At Eurohouse Studio, we solve this problem at the source. Before construction starts, we complete a fully integrated design process that leaves nothing undefined.

This includes complete architectural drawings, detailed interior design documentation with wall-by-wall elevation drawings for every room, photorealistic 3D renderings so you can see exactly what your home will look like, comprehensive material and finish specifications, and engineering coordination to validate that everything is buildable as designed.

Rainbow in Whistler — this double-height marble fireplace feature wall was fully designed, specified, and rendered in 3D before the fixed-price construction agreement was signed.

When the homeowner has seen every space in photorealistic 3D and approved every material and detail, there are no assumptions left. And when there are no assumptions, we can guarantee the price.

Change Orders: Who Pays for What?

This is one of the most important distinctions between the two contract types, and it's worth being direct about it.

On a cost-plus contract, the homeowner pays for everything — including the contractor's errors, drawing imperfections, coordination failures, and rework. If the framing crew misreads a dimension and has to redo a wall, you pay for it. If the plumber and electrician weren't properly coordinated and work has to be torn out, you pay for it. All of it gets billed to you as "actual costs."

On a fixed price contract, those costs belong to the contractor. If we make an error, it comes out of our margin, not your budget. Change orders only happen when you decide to make a modification — a different countertop, an added feature, a layout change you want after seeing the space take shape. That's a legitimate change order, and it's priced transparently. But it's your choice, not our mistake.

Performance Bonds: A Third-Party Guarantee

Eurohouse Construction carries performance bonds on qualifying projects. A performance bond is a third-party financial guarantee — issued by a bonding company — that the contractor will complete the project according to the agreed scope, price, and timeline.

Performance bonds are standard in municipal construction and insurance restoration. Municipalities and insurance companies work exclusively on fixed price agreements because they require absolute cost certainty. There is no such thing as cost-plus on that level of contract. And the performance bond is the mechanism that enforces it.

The fact that we can secure performance bonds for residential projects tells you something important: a bonding company has independently verified that we have the financial stability and track record to deliver on our commitments. That's a level of assurance that no cost-plus contract can offer.

Timeline Guarantees

In addition to fixed pricing, we provide clearly defined construction schedules and accept delay penalty clauses. We're comfortable with this because when the design is complete, the scope is clear, and the team is aligned, construction timelines are predictable.

We do ask that this commitment works both ways. Timeline guarantees are meaningful when the project operates within a cooperative framework: timely homeowner decisions, timely progress payments, and a healthy working relationship between all parties. When those conditions are in place, we stand behind the dates we commit to.

The H House — complex curved framing and multi-level atrium construction. Disciplined scheduling and coordination keep even the most ambitious projects on timeline.

When a Hybrid Approach Makes Sense

We believe in being straightforward. While fixed price contracts provide the highest level of protection, there are situations where certain limited elements of a project genuinely cannot be fully defined in advance. This typically happens when working with existing structures, concealed building components, or conditions that can't be fully inspected before construction starts.

In these cases, we offer a hybrid model: the vast majority of the project remains fixed price, with only specific, clearly identified elements handled transparently on a variable basis. Because our design process is so thorough, hybrid components are typically minimal. But we'd rather be honest about what can and can't be guaranteed than make promises we can't keep.

The Turnkey Advantage

Building a custom home requires hundreds of decisions. For busy homeowners, the process can become overwhelming — especially when it involves coordinating multiple separate firms for architecture, interior design, engineering, permitting, and construction.

Eurohouse Studio and Eurohouse Construction provide a complete turnkey solution under one roof: house design, interior and exterior design, engineering coordination, building permit applications, municipal process management, construction, and even furniture and decoration supply. One team, one contract, one point of accountability — from the first sketch to the day you move in.

This isn't just about convenience. It's about alignment. When every phase of the project is managed by the same team that will ultimately build it, decisions are made with constructability, cost, and timeline in mind from the very beginning. That's what eliminates the surprises that plague fragmented project delivery.

Who Benefits Most from Fixed Price?

Fixed price construction is ideal for custom home construction in West Vancouver, luxury home renovations in North Vancouver, residential projects in Lions Bay, custom homes and vacation properties in Whistler, condominium renovations in Vancouver, and insurance restoration projects across the North Shore.

In short — if you're investing significantly in your home and you want to know what it will cost before you start, fixed price with complete design is the way to protect that investment.